Although the real estate market is in constant flux, it remains one of the smartest investments and wealth builders for the average person in today's society. Buying a foreclosed home is fast becoming more common then not in today's economy. They often represent a fantastic deal, but a little more care must be taken during the buying process.
What is a foreclosed home?
A foreclosed home has completed the process of being taken back by the lender, which is called the foreclosure process. After regaining possession the lender will list it with a real estate agent. At this point, it is commonly referred to as REO (Real Estate Owned) or bank owned property.
Some Tips When Writing an Offer on Bank Owned Property:
♦ With an REO you deal with a bank or lender that may be located far away and has never seen the property and is unfamiliar with the local market. It may take longer to receive a response to your offer then if you are dealing with a local seller.
♦ Be sure to read the REO addendum or Rider thoroughly prior to writing an offer. There may be stipulations or condtions in the addendum that will supersede your local earnest money contract. For example, your local contract may allow for a 15 day inspection period but the adddendum only allows for 10. Without negotiating this time frame during the offer process, the time frame would stand at 10 days.
♦ Never use electronic signatures such as Docusign. They are not accepted by most banks and will cause you to lose time on your offer writing process and if you are competing it could make a difference.
♦ Make sure your earnest money deposit is a cashier's check or certified funds. Your earnest money could be transferred to the listing office of the property or the title company. Some lenders do not accept cash earnest money deposits. When writing an offer with financing, a minimum of $500 is required. When writing an offer for cash, 10% of the sales price is required as an earnest money deposit.
♦ Make sure that the offer is signed by all parties on the loan, adding a buyer to a contract after the fact can delay closing by weeks.
♦ Make sure to get a satisfactory inspection, most REO properties are sold AS-IS and it is important to know the condition of the property you are purchasing (REO or not) and what will need to be done when it becomes your new home.
Somers & Associates REALTORS represent many REO companies and have over 10 years experience dealing with REO properties and REO Companies and/or Asset Managers. Let their experience help you with your biggest investment!!!